Cambodia’s Growth May Lure Samsung Asset to Newest Stock

Sam Rainsy, leader of Cambodia's main opposition political party, said investors in Cambodia face risks in the stock market because of ineffective financial and legal systems. Photographer: Balint Porneczi/Bloomberg 

By Weiyi Lim and Anuchit Nguyen 

Bloomberg Business Week

Apr 18, 2012

Cambodia opened its stock market today as the government seeks to lure foreign capital by selling shares in state-owned companies to bolster the economy.

While only one stock -- Phnom Penh Water Supply Authority - - started trading today, Samsung Asset Management Co., South Korea’s largest money manager, said it would consider buying Cambodian stocks after about a year. Cambodia, along with Laos, Vietnam and Myanmar, are poised to emerge as “new frontier growth markets” that will start catching Southeast Asia’s biggest economies, Samsung Asset’s Alan Richardson, who helps oversee $89.5 billion, said by phone from Singapore yesterday.

“The Indochina markets are all interesting because there is so much opportunity,” Richardson said. His Samsung ASEAN Securities Master Investment Trust (5670800) has risen 12.1 percent this year, beating 72 percent of its rivals, data compiled by Bloomberg show.

Economic growth in Cambodia, with a population of 14.3 million, may reach 6.5 percent this year, the Asian Development Bank estimates. While that’s less than the average of 8 percent between 2001 to 2010, it’s more than the ADB’s prediction of 6.4 percent growth for Indonesia, Southeast Asia’s largest economy, and 5.5 percent for Thailand, the second biggest.

Cambodia’s stock market opened at 9:09 a.m. with Deputy Prime Minister Keat Chhon presiding over the start, the Cambodia Securities Exchange said in a statement on its website. From tomorrow, stocks will trade between 8 a.m. and 11:30 a.m. in Phnom Penh with prices being quoted twice a day, according to the bourse.

More Share Sales

Phnom Penh Water jumped 48 percent to 9,300 riel ($2.33) with volume of 879,426 shares on its debut, according to data on the exchange’s website. The utility, which has 86.97 million shares being traded on the bourse, sold shares at 6,300 riel in its initial public offering, according to the exchange.

Cambodia may be able to lure five-to-10 IPOs a year, said Kim Bong Soo, chairman of Korea Exchange Inc., the Cambodian government’s partner in the bourse. Telecom Cambodia and Sihanoukville Autonomous Port are preparing to sell shares, he said in an April 9 interview.

The Cambodian government has said it wants to spur economic development by privatizing its state-owned companies and encouraging private enterprises to expand with new funding. There are no restrictions on foreign investors, according to the Securities & Exchange Commission of Cambodia’s website.

Within five years, the market value of traded shares could constitute a quarter of the country’s gross domestic product, or more than $3 billion, Kao Thach, deputy director general of the SECC, said in a February interview in Phnom Penh. Banks, telecommunications companies, rice millers, garment firms and mining companies could seek public listings, he said.

‘Take Some Time’

Investors in Cambodia face risks in the stock market because of ineffective financial and legal systems, Sam Rainsy, 62, a former finance minister and the head of the biggest opposition party, said in a Feb. 8 interview. Cambodia was ranked by Transparency International last year as 164th in the world by perception of corruption, ahead of only North Korea, Myanmar and Afghanistan in Asia.

“It will take some time to educate the general public to understand its importance and function,” Te Taingpor, the president of the Federation of Association for Small & Medium Enterprises of Cambodia, said by phone from Phnom Penh yesterday.

Khmer Rouge

Prime Minister Hun Sen has ruled Cambodia in some capacity for most of the past three decades, overseeing the country’s transition to stability after battles with remnants of the Khmer Rouge regime blamed for the deaths of least 1.7 million people from 1975 to 1979. His Cambodian People’s Party has won the past three national parliamentary elections.

Washington-based Freedom House, a group that advocates democracy, last year ranked Cambodia among 48 countries that are “not free,” meaning basic political rights are absent and civil liberties are “widely and systemically denied.” Cambodia ranked 164th out of 182 countries in Transparency International’s 2011 Corruption Perceptions Index, below Zimbabwe and Kenya.

The Ho Chi Minh City Stock Exchange, Vietnam’s biggest, started in July 2000 with two companies. It now has more than 300 publicly traded companies with a total market value of about $26.6 billion. Laos, Southeast Asia’s smallest economy, opened its stock exchange in January 2011. The two-stock Laos Composite Index soared 86 percent in its first three weeks of trading and has fallen more than 40 percent since then.

Closing the Gap

Tokyo Stock Exchange Group Inc. and Daiwa Securities Group Inc. said in an April 11 statement that they had negotiated a “memorandum of understanding” to establish a stock exchange in Myanmar and develop the country’s capital markets.

“I think we are now in the cycle for these four Asean markets to emerge as the new frontier growth markets and close the gap with the established Asean-5 markets of Singapore, Malaysia, Thailand, Indonesia and the Philippines,” Richardson said, referring to the Association of Southeast Asian Nations.

Cambodia had gross domestic product of $11.24 billion in 2010, World Bank data show. That’s compared with Indonesia’s $706.6 billion and Thailand’s $318.5 billion, the data show.

“The GDP levels are very, very low,” Thomas Hugger, managing partner at Leopard Capital Management Ltd., said in a Bloomberg Television interview yesterday from Hong Kong. “We are very optimistic. There will be sustained growth for the future.” His firm bought Phnom Penh Water shares in the company’s IPO.

To contact the reporters on this story: Weiyi Lim in Singapore at wlim26@bloomberg.net; Anuchit Nguyen in Bangkok at anguyen@bloomberg.net

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net